Case Law Details
Winsome Breweries Ltd Vs Commissioner (CESTAT Delhi)
In a recent decision by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Delhi, the case of M/s. Winsome Breweries Ltd. vs. Commissioner brought to light significant clarifications regarding the application of service tax on services related to the manufacture and sale of beer. The ruling sheds light on the interpretation of relevant provisions under the Finance Act, 1994, and provides insights into the eligibility for exemptions under specific notifications. This article aims to dissect the nuances of the case and its implications on businesses engaged in similar activities.
Background of the Case
M/s. Winsome Breweries Limited (WBL) operates manufacturing facilities and holds statutory licenses for the production and sale of alcoholic beverages, particularly beer. The company entered into an agreement with M/s. United Breweries Limited (UBL) wherein WBL undertook the manufacturing of beer bearing the brand names ‘Kingfisher’ & ‘Bullet’ owned by UBL. This arrangement operated under the complete control and supervision of UBL, essentially functioning as a job-work basis.
Key Legal Issue
The crux of the dispute revolved around the applicability of service tax on the activities conducted by WBL in manufacturing beer for UBL. Post an amendment to the definition of “Business Auxiliary Service” (BAS) under Section 65(19) of the Finance Act, 1994, effective from September 1, 2009, the exemption from service tax on production or processing of goods for or on behalf of the client was restricted to “excisable goods.” As alcoholic liquor for human consumption did not fall under the purview of “excisable goods,” WBL’s activities were deemed taxable under the amended definition of BAS.
Contentions Raised
WBL contested the denial of exemption benefits concerning the value of inputs used, citing Notification No. 39/2009-ST dated 23.09.2009 and Notification No. 43/2009-ST Dated 02.12.2009. Despite not availing Cenvat Credit on inputs, the authorities presumed the possibility of future claims and denied the benefit of the aforementioned notifications. However, WBL clarified through an affidavit that they had not utilized Cenvat Credit and intended to comply with the conditions outlined in the notifications.
CESTAT Ruling
The CESTAT Delhi, after considering the submissions from both parties, upheld WBL’s contention. It acknowledged the affidavit submitted by WBL, affirming their non-usage of Cenvat Credit and their intention to comply with exemption conditions. Consequently, the tribunal directed the adjudicating authority to reconsider and allow the benefit of the exemption notifications to WBL. Additionally, the ruling emphasized the distinction between service tax imposed on the value of services provided by job workers/contract manufacturers and the wholesale price of alcohol, citing relevant legal precedents.
Implications
The CESTAT ruling provides clarity on the eligibility criteria for exemption notifications concerning service tax on activities related to the manufacture and sale of alcoholic beverages. It underscores the importance of compliance with statutory provisions and the significance of providing clear documentation to substantiate claims for exemptions. Moreover, the ruling reaffirms the legal interpretation regarding the imposition of service tax solely on the value of services rendered, excluding the wholesale price of goods.
Conclusion
The decision in the case of M/s. Winsome Breweries Ltd. vs. Commissioner by CESTAT Delhi elucidates crucial aspects regarding the applicability of service tax on services pertaining to the manufacture and sale of beer. By emphasizing compliance and substantiation of claims, the ruling sets a precedent for businesses operating in similar domains. Furthermore, it reaffirms the legal interpretation regarding the taxation framework concerning job-work arrangements in the alcoholic beverage industry, providing clarity and guidance for both taxpayers and regulatory authorities alike.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Winsome Breweries Limited are having the manufacturing facilities as well the required statutory licences for the manufacture and sale of alcoholic liquor (Beer) for human consumption. The appellant entered Into an agreement with M/s. United Breweries Limited which was amended from time to time, under which, alcoholic liquor (Beer) bearing the brand names ‘Kingfisher’ & ‘Bullet’ owned by M/s. United Breweries Limited ( M/s UBL) would be manufactured by the appellant under job-work basis, under the complete control and supervision of M/s UBL.
2. Post the amendment to the definition of “Business auxiliary Service” (BAS for short) under Section 65(19) of Finance Act, 1994 w.e.f 1.09.2009 the exemption from the production or processing of goods for or on behalf of the client had been restricted to the “excisable goods” and thus, in this case, admittedly the alcoholic liquor for human consumption are not “excisable goods” and hence the appellant’s activity was covered under the amended definition of BAS wef 1.09.2009 and was liable to Service Tax. The period of dispute in this present appeal is from 1.09.2009 till 30.06.2012 and the show cause notice dated 05.08.2014 was issued invoking the larger period of limitation under Sec 73(1) of the Finance Act, 1994, demanding Service Tax to the tune of Rs. 14, 85 ,16,613/-
Arguments advanced by the party,
3. The Show cause notice as well as the Order – in – Original denied the benefit of exemption for the value of Inputs used, as per Notification No. 39/2009 ST dated 23.09.2009 and Notification No. 43/2009 ST Dated 02.12.2009 (issued for the period 1.09.2009 to 22.09.2009, under Section 11 C of the Central Excise Act, 1944 as made applicable to service tax) on the mere ground that the said benefit will be allowed only if the Cenvat Credit has not been availed however in the Statement of the Director of the Appellant Company Sh. R.K. Bagrodia has deposed that “as on today they have not availed Cenvat Credit paid on the inputs/raw materials however they reserve their right to claim Cenvat Credit as and when required in future”. In other words, the learned Adjudicating Authority (hereinafter LAA) had presumed that the appellant may claim Cenvat Credit in the future, and denied the benefit of Notification No. 39/2009- St dated 23.09.2009 read with 43/2009 ST dated 02.12.2009.
3.1 Though the fact remains undisputed that the appellant-company has not taken any Cenvat credit on any of the inputs, including raw materials, packing materials, consumables etc pertaining to the goods in question as well as the period in dispute, the Appellant has before us filed an Affidavit dated 26.10.2023 to the above extent, which they submitted is in due compliance to avail the benefit under the above said Notifications. The appellants also inter alia took other grounds
4. Heard Learned A.R, he reiterates the findings and pleads that benefit of exemption notification can only be allowed on fulfillment of conditions and not on the basis of any assurance.
5. Further, refence was drawn to the decision of the Hon’ble Delhi High Court in the case of Carlsberg India Private Limited, International Spirits and Wines Association of India (ISWAI) & others, confederation of India Alcohol Beverages Companies vs. Union of India & Others – 2016 (8) TMI 250 wherein it has been categorically held that service tax is only being Imposed on the value of the services provided by the job worker/contract manufacturer and not on the whole sale price of alcohol. The relevant portion extracted below:-
49. It is not possible to agree with the above submission when a clear distinction is discernible between manufacture of such alcoholic liquor by oneself and for another. The latter partakes the character of rendition of a service which is not possible to be accommodated within the act of manufacture by oneself. The act of manufacturing for another by way of job work answers the plain definition of service under Section 66B (44) of the FA which begins with: ” ‘service’ means any activity carried out by a person for another for consideration and includes a declared service, but shall not include…”. Therefore it is a fallacy to equate the two activities viz., manufacture of such alcoholic liquor by and for oneself and undertaking manufacture for another. The changes brought about in 2015 was intended to capture the latter aspect which is unique to job work for the purposes of levy of service tax. In his budget speech on 28th February 2015, the Finance Minister explained, inter alia, that service tax was “to be levied on service by way of carrying out any processes as job work for production or manufacture of alcoholic liquor for human consumption” It is significant that the Respondents in their written submissions have confirmed that “service tax is only being imposed on the value of the services provided by the job worker/contract manufacturer and not on the whole sale price of alcohol.”
5.1 In view of the above decisions as well as the Notification as well as the departmental communication, it is amply clear that the cost of the inputs including raw materials, packing materials, consumable etc, as well as the brand owner’s profit and reimbursable expenses cannot be included in the assessable value of taxable service provided by the appellant, and the service tax shall only be imposed on the service provided by the job worker. Accordingly, the appellant had computed the tax liability of Rs. 1,43,93,831/- which has already been paid along with appropriate interest of Rs. 40,12,640/-, which has been taken due cognizance in the 010.
5.2 Further, the show cause notice dated 05.08.2014 was also time barred because the limitation to issue the show cause notice during the relevant time was 18 months only, however, in present case the show cause notice was passed on 05.08.20 14 for the period 01.09.2009 to 30.06.20 12 which is nearly about 26 months after the dispute which signifies that it is already time barred. Recently Principal bench of the Hon’ble Tribunal, Delhi in the case of M / s Mount Everest Breweries Limited vs. Commissioner of CGST & Central Excise, Indore – 2023 (7) TMI 199 has set aside an order on an identical set of facts and circumstances, on the mere reason that extended period of limitation cannot be invoked, therefore, cannot be sustained.
5.3 In view of the above ground, the appellant cannot be saddled with any demand of service tax during the impugned period by invocation of larger period and the same is hit by limitation and hence the amount paid by them under protest may please be ordered to be refunded as consequential relief.
6. The nature of business of appellants was explained by the advocate in details.
The Appellant i.e. M/s. Winsome Breweries Limited (WBL) is engaged in the manufacturing, brewing and bottling of alcoholic beverages. DGCEI has collected intelligence that the appellant have entered into a contract with M/s. United Breweries Limited (UBL) for manufacture and sale of alcoholic liquor (beer) for human consumption, for and on behalf of M/s . UBL.
6.1 The appellant have entered into a contract with M/s. UBL for manufacture and sale of ‘Beer’, for and on behalf of M/s. UBL and during the course of the said activities, they have provided services in relation to such manufacture and sale of beer, which is an alcoholic liquor for human consumption, to M/s. UBL. The said services provided by the appellant appeared to be taxable under the category of “Business Auxiliary Services” as defined under Section 65(19) of Chapter V of the Finance Act, 1994 read with Section 65(105)(zzb) of the Act, ibid in view of amendments brought in the section 65(19) vide Finance Act, 2009 w.e.f. 01.09.2009. Despite the fact that the appellant were providing taxable services to M/s. UBL, neither the appellant registered themselves under the said category of taxable services, nor was paying the service tax and also not filing ST-3 returns.
7. Accordingly, Show Cause Notice dated 05.08.2014 was issued to the appellant for the period Sep-2009 to June-2012 demanding service tax amounting to Rs.14,85,16,613/- under the provisions of Section 73 along with interest and alleging liability of penalty.
8. The subject matter was adjudicated by the Commissioner of Central Excise, Alwar vide Order-in-Original No. OIO No. ALW-EXCUS-0-1-0-COM- 30-2015-16 dated 28.01.2016, wherein, the Adjudicating Authority has confirmed the total service tax demand of Rs.14,85,16,613/- under Section 73(1) and appropriated an amount of Rs.1,43,93,831/- already paid; ordered for recovery of interest under Section 75 and appropriated an amount of Rs.40,12,640/- already paid; imposed penalty of Rs.10,000/- or two hundred rupees for every day till the failure continues whichever is higher under Section 77; and imposed penalty of Rs.14,85,16,613/- under Section 78(1) of the Finance Act, 1994.
9. Aggrieved by the said 0-1-0, the Appellant filed the present Appeal before Hon’ble CESTAT.
Case of the Department.
10. Learned A.R reiterated finding of Order-in-Original. It was further stated that Para 3.1 of CBIC letter D.O.F. No. 334/13/2009-TRU dated 07.2009 has clarified the issued as under:
3.1 Modification in Business Auxiliary Service (BAS) [section 65(19): It may be recalled that production or processing of goods for or on behalf of a client falls within the purview of this service. However, if any such activity amounts to manufacture within the meaning of section 2(f) of the Central Excise Act, the same is excluded from its purview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of ‘excisable goods’. Both words/ phrases i.e. ‘manufacture’ and ‘excisable goods’ would have the same meaning as defined under the Central Excise Act. The impact of this change would be that even if a process of manufacture is undertaken to the client, but the resultant product does not falls under the category of excisable goods, such as alcoholic beverages, the service tax would be attracted. Certain other goods which would also fall under BAS on account of the proposed change would be kept outside the tax net byway of exemption notification, to be issued at the appropriate time.
10.1 Reliance was placed on the decision of Hon’ble High Court of Delhi in case of Carlsberg India Private Limited vs. Union of India, 2016
(44).T.R.349(Del.) dated 05.08.2016.
11. We have considered the rival submissions. We find that at this stage, the appellants have produced before us an affidavit by way of undertaking in relation to Notification No. 39/2009 ST dated 23.09.2009 read with Notification No. 43/2009 ST Dated 02.12.2009. The affidavit was filed at the instance of this bench, so as to comply with condition that was found lacking by the adjudicating authority. The appellants have now categorically stated that, they have not taken any Cenvat Credit nor intend to take the same, as per requirement of the aforesaid notifications. We find that this affidavit and undertaking should make them eligible for the benefit of notification as other conditions were not found to be unfulfilled by the adjudicating authority. Accordingly, we allow the affidavit to be taken on record and direct the adjudicating authority to consider the same and allow the benefit of exemption notification as claimed by the appellants. We are therefore, not pronouncing on various other grounds taken by the appellants. Appeal is therefore, allowed in above terms. The adjudicating authority shall appropriately consider the benefit of the notification to be allowed to the appellant in the light of affidavit having been filed with undertaking of not availing the credit, which has been stated to be not taken till date by the appellant.
12. Appeal disposed of in above terms.
(Order pronounced in the open court on 05.12.2023)
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